Term sheets

Key points

  • Term sheets:
    • Describe the nature of the investment.
    • Outline the price of a share and whether investors are paying up front or in tranches.
    • Are not legally binding, and are conditional on entry into formal legal subscription or shareholder agreements.
    • Should clarify what terms are binding and what terms are not.
  • It's helpful to define shareholder terms to avoid issues further down the line.
  • Some other items an investor will want to include are:
    • Key performance milestones (they may also choose to make tranche payments against meeting these).
    • Founder commitments, for example, staying in the role for a minimum period.

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